This MSO Is Doing Some Good Things

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.

Friends,

Green Thumb Industries announced a move to partner with a chocolate company this week to bring edibles products using its “incredibles” brand to New York and New Jersey. I am very bullish on New York, the extraordinary growth of which I discussed earlier this month. I am also a fan of incredibles as a consumer historically. We interviewed MC Brands co-founder Bob Eschino in early 2018 about the success of the company in developing the brand.

We never reported it, though I do remember it happening. In early 2019, GTI bought Medically Correct, issuing 1.71 million shares, trading then about $11, for the rest of the company after having previously made a small purchase. GTI never issued a press release, but it did issue a filing on SEDAR back then. The company doesn’t break down its sales by geography or type of product, so it’s not exactly clear how this acquisition has fared for GTI.

The part of the press release that stood out to me was that GTI plans to sell products online in 24 states. How? Through THC from industrial hemp. Less than a month ago, I discussed here how THC from hemp is heating up. It’s very nice to see GTI positioning to sell branded THC products across many different states.

GTI is now up 1.2% in 2024 after a big jump this week, but it is lagging the overall stock market and even the NCV Global Cannabis Stock Index, which has increased 9.5%. I like some of the things it is doing, and its valuation, typically a premium to its peers, is only slightly above its Tier 1 MSO peers:

What stands out to me about its valuation is that the company has such a better balance sheet than its peers, with less debt and more tangible book value. As much as I like this, I own none in my 420 Investor model portfolio. I did upgrade the stock in early May at Seeking Alpha, calling it no longer a sell, but I think that there are better MSO alternatives and other cannabis stocks that make more sense despite its further decline since then.

How GTI performs in the near-term will depend most upon the cannabis rescheduling, which is in process. Due to its strong balance sheet relative to peers, GTI depends less upon 280E taxation going away, but it will benefit substantially. On the other hand, if 280E ends up sticking around, GTI is much safer than most peers due its low amount of debt. The other big near-term issue facing the market is legalization for adult-use in Florida, where GTI is an operator. While they have increased their dispensary count in the state from 14 at year-end to 20 currently, GTI has only 3% of the total dispensaries in Florida. The company is clearly not betting the ranch on that state, which has seen its medical cannabis market become extremely competitive.

I think cannabis stocks are pretty cheap overall, and GTI should do well over time. I pointed out above that it is open-minded to using industrial hemp as a source, which I think is a smart move, and its balance sheet stands out. The company is broad, operating in 14 states, and is a revenue leader in the U.S. The company understands how important it is to develop strong brands.  GTI is doing some good things!

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:

Capital Raising

Mergers and Acquisitions

SNDL Closes Nova Cannabis Acquisition

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Sincerely,

Alan

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email